Tag: Levels of Strategy

Levels of strategy refer to the different hierarchical levels at which strategic decisions are formulated and implemented within an organisation. Each level has a specific purpose and scope, but all levels are interconnected. Generally, organisations have three major levels of strategy: Corporate Level Strategy, Business Level Strategy, and Functional Level Strategy. In SHRM, understanding these levels is important because HR strategies must be aligned with the organisation’s overall strategic direction.

Levels of Strategy

1. Corporate Strategy

Corporate strategy is the long-term strategy encompassing the entire organisation. Corporate strategy addresses fundamental questions such as what is the purpose of the enterprise, what business/businesses it wants to be in (portfolio strategy) and how to expand/get into such business/businesses (for example – by establishing greenfield enterprises or by M&As).

In other words, “corporate-level strategic management is the management of activities which define the overall character and mission of the organisation, the product/service segments it will enter and leave, and the allocation of resources and management of synergy among its SBUs.”

Corporate strategy is formulated by the top level corporate management (board of directors, CEO, and chiefs of functional areas).

2. SBU Strategy or Business Level Strategy

Business-level strategy focuses on how a particular business unit competes within its industry or market. It determines how the organisation will create customer value and achieve competitive advantage over rivals. Major approaches include cost leadership, differentiation, and focus strategies. From an SHRM perspective, business strategy determines the employee competencies and behaviours required for competitive success. HR policies related to recruitment, training, rewards, and performance management should therefore support the selected competitive strategy.

SBU-level strategy, sometimes called Business Strategy or Competitive Strategy, is concerned with decisions pertaining to the product mix, market segments and manoeuvring competitive advantages for the SBU.

While corporate strategy decides the business portfolio (i.e., the types of business), the competitive strategy decides the strategy/strategies to succeed in the chosen business/businesses.

SBU strategy has to conform, obviously, to the corporate philosophy and strategy.

In short, “the SBU-level strategic management is the management of an SBU’s effort to compete effectively in a particular line of business and to contribute to overall organisational purposes.”

The responsibility for SBU strategy is with the top executives of the SBU who are normally second-tier executives in the corporate hierarchy. In single  SBU organisations, senior executives have both corporate and SBU-level responsibilities.

3. Functional Strategies

Functional-level strategy is developed for specific organisational departments such as human resources, marketing, finance, operations, production, and information technology. It translates corporate and business-level strategies into specific departmental actions and programmes. For example, HR may develop strategies for recruitment, employee development, compensation, and performance management. Functional strategies ensure effective resource utilisation, departmental coordination, and implementation of broader organisational strategies.

Summary of Levels of Strategy